Corporation Law, Mercantile Law

GLOBAL BUSINESS HOLDINGS v. SURECOMP SOFTWARE GR No. 173463, Oct 13, 2010 Foreign Non-Resident Corporations, Capacity to Sue, Doctrine of Estoppel, Merger

FACTS:

Respondent Surecomp, a foreign corporation duly organized and existing under the laws of the Netherlands, entered into a software license agreement with Asian Bank Corporation (ABC), a domestic corporation, for the use of its IMEX Software System in the bank’s computer system for a period of twenty (20) years.

In July 2000, ABC merged with petitioner Global Business Holdings, with Global as the surviving corporation. When Global took over the operations of ABC, it informed Surecomp of its decision to discontinue with the agreement and to stop further payments thereon. 

For failure of Global to pay its obligations under the agreement despite demands, Surecomp filed a complaint for breach of contract with damages before the RTC of Makati. 

In its complaint, Surecomp alleged that it is a foreign corporation not doing business in the Philippines and is suing on an isolated transaction for Global’s failure to pay notwithstanding the delivery of the product and the services provided. 

Global filed a motion to dismiss. Global stressed that it could not be held accountable for any breach as the agreement was entered into between Surecomp and ABC. 

The RTC ruled that Global Bank is not relieved of its contractual obligation under the Agreement on account of its undertaking under it.

“x x x shall be responsible for all the liabilities and obligations of ABC in the same manner as if the Merged Bank had itself incurred such liabilities or obligations, and any pending claim, action or proceeding brought by or ABC may be prosecuted by or against the Merged Bank.  

Surecomp moved for partial reconsideration, praying for an outright denial of the motion to dismiss, while Global filed a motion for reconsideration.

The RTC issued an Order denying the motion to dismiss.

Global filed a petition for certiorari with prayer for the issuance of a TRO and/or writ of preliminary injunction before the CA. The CA denied the petition, as well as the subsequent MR.

Hence, this petition.

ISSUE:

Whether or not Global is estopped from questioning Surecomp’s capacity to sue.

RULING:

The petition is bereft of merit.

As a rule, unlicensed foreign non-resident corporations doing business in the Philippines cannot file suits in the Philippines. This is mandated under Section 133 of the Corporation Code, which reads:

Sec. 133.  Doing business without a license. – No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines, but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.

A corporation has a legal status only within the state or territory in which it was organized. For this reason, a corporation organized in another country has no personality to file suits in the Philippines. In order to subject a foreign corporation doing business in the country to the jurisdiction of our courts, it must acquire a license from the SEC and appoint an agent for service of process. Without such license, it cannot institute a suit in the Philippines.

The exception to this rule is the doctrine of estoppel. Global is estopped from challenging Surecomp’s capacity to sue.

A foreign corporation doing business in the Philippines without license may sue in Philippine courts a Filipino citizen or a Philippine entity that had contracted with and benefited from it. A party is estopped from challenging the personality of a corporation after having acknowledged the same by entering into a contract with it. 

The principle is applied to prevent a person contracting with a foreign corporation from later taking advantage of its noncompliance with the statutes, chiefly in cases where such person has received the benefits of the contract. 

Due to Global’s merger with ABC and because it is the surviving corporation, it is as if it was the one which entered into contract with Surecomp. In the merger of two existing corporations, one of the corporations survives and continues the business, while the other is dissolved, and all its rights, properties, and liabilities are acquired by the surviving corporation. This is particularly true in this case. 

In the same way, Global also has the right to exercise all defenses, rights, privileges, and counter-claims of every kind and nature which ABC may have or invoke under the law.  These findings of fact were never contested by Global in any of its pleadings filed before this Court.

Leave a Reply

Your email address will not be published.